The grass is greener...

October 18 2002 - A majority of workers believe they can get better pay elsewhere, according to a Watson Wyatt survey of nearly 13,000 employees in the US.

The Watson Wyatt WorkUSA(R) 2002 study shows that just 41% of employees think they are paid as much as people in equivalent positions at other companies. And fewer than half (48%) believe they are paid fairly in comparison to workers with similar jobs in their own organizations.

"Companies must take a close look at employees' perceptions of pay fairness both within and outside their own organizations or risk losing people once the economy improves and labor market mobility is restored," said Ilene Gochman, Watson Wyatt's national practice leader for organizational measurement and author of WorkUSA(R) 2002. "In fact, other Watson Wyatt research has shown that pay dissatisfaction is a key reason why top performing employees leave their companies."

Inadequate communication is pinpointed as a significant contributor to employees' dissatisfaction with their pay, according to the survey. Just 43% of workers said their organizations were good at explaining how their pay is determined. This is 13-points down since 2000 and the worst figure for pay communication since 1994. And 20% of employees claimed not to know what their total compensation packages are worth.

The survey's findings on employee benefits demonstrate the value of effective communication: over two thirds (68 percent) of employees felt that their organizations are good at providing information on their benefits. This strategy seems to be paying off as shown by a 10-point improvement over the 2000 results in the percentage of employees who believe their benefits packages compare well to packages offered by other companies - 42% in 2002.

"The high marks given to companies for benefits communication suggest that improvements in pay communications are possible. Companies clearly know how to communicate -- they just need to better apply their communication strategies to their pay-related practices," said Gochman.

Employees' reactions are mixed on specific benefits strategies. Most workers are satisfied with leave benefits (71%), savings plans (67%), health care plans (64%) and pension/retirement plans (60%). But it seems that the economic downturn has affected employee attitudes toward profit sharing and stock programs. Satisfaction with profit sharing plans fell by 10 points to 45% between 2000 and 2002. Satisfaction with stock programs declined by 7 points to 50% over the same period.

Gochman said that the study results show that companies must do a better job linking employees' pay to their performance. "Despite evidence that pay differentials between strong performers and weak performers boost firms' financial performance, only one-third (35 percent) of employees told us there is a clear link between how well they do their jobs and the money that they earn."

Crporate strategy shifts appear to have left many employees confused about the link between their jobs and company objectives. The study shows that fewer than half of employees (49%) understand the steps their organizations are taking to reach new business goals - a drop of 20% since 2000. The study also found that only 35% see clear links between the quality of their job performance and the money they earn.

"Confusion about corporate goals and uncertainty about the link between pay and performance will complicate economic recovery for many companies," said Ilene Gochman. "This is extremely unfortunate because we know that there is tremendous positive impact to the bottom line when employees see strong connections between company goals and their jobs. Many employees aren't seeing that connection."

The study also reveals that 3-year total returns to shareholders (TRS) are three times higher in companies where workers understand corporate objectives and the ways in which their jobs contribute to achieving them.

"Companies cannot develop effective teams and working relationships unless everyone involved clearly understands the connections between their jobs and objectives," Gochman added. "Workers and their companies excel when they know why their jobs matter and they understand what's in it for them."

"In every case, we found that employee attitudes make a difference when it comes to business performance," Gochman said. "For example, companies that instill trust, manage business changes effectively and communicate openly with employees have much higher shareholder return rates than companies that don't. This means that in today's economic climate, no company can afford to ignore what their employees are thinking."

WorkUSA(R) is one of the largest and most current statistically representative surveys on the attitudes of U.S. workers. The 2002 survey includes responses from 12,750 workers at all job levels and in all major industries. Copies of the survey report are available for purchase by visiting www.watsonwyatt.com/research/reports.asp.